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Global Market Report - 15 January

Lex Hall  |  15 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to edge higher despite losses on Wall Street as poor job figures overshadowed covid stimulus measures.

The Australian SPI 200 futures contract was up 5 points, or 0.1 per cent, at 6,654 points at 8.30am Sydney time on Friday, suggesting a positive start to trading.

Wall Street closed lower on Thursday as hopes for fresh fiscal stimulus ahead of President-elect Joe Biden’s pandemic aid proposal were pitted against a weakening labour market.

The Dow Jones Industrial Average fell 68.95 points, or 0.22 per cent, to 30,991.52, the S&P 500 lost 14.3 points, or 0.38 per cent, to 3,795.54 and the Nasdaq Composite dropped 16.31 points, or 0.12 per cent, to 13,112.64.

Locally, Figures from the Australian Securities & Investments Commission showed the first year-on-year increase in the weekly insolvency count in at least six months—a development that experts said may be a “sign of things to come”, The Australian reports.

The S&P/ASX200 benchmark index closed higher by 28.7 points, or 0.43 per cent, to 6,715.3 on Thursday.

The result was the index's highest close since February 25 last year, when investors began selling due to the coronavirus threat.

The All Ordinaries closed higher by 28.8 points, or 0.41 per cent, at 6,982.7.

The smaller information technology sector was best, up 4.73 per cent.

Gold was up 0.3 per cent at $US1,851.70 an ounce; Oil was up 0.4 per cent to $US56.26 a barrel; Iron ore was up 1.3 per cent to $US172.36 a tonne.

Meanwhile, the Australian dollar was buying 77.87 US cents at 8.30am, up from 77.49 US cents at Thursday's close.

Asia

China’s main Shanghai Composite index fell 0.91 per cent at 3,565.90 points, while the blue-chip CSI300 index shed 1.93 per cent, amid fears over rising covid-19 cases.

Hong Kong shares flirted with a one-year high on Thursday, after the Trump administration decided to scrap a planned investment ban involving Alibaba and Tencent, while reports of a possible big US stimulus package also boosted sentiment.

The Hang Seng index gained 261.26 points, or 0.93 per cent, at 28,496.86, its highest close since 20 January, 2020.

Around the region, MSCI’s Asia ex-Japan stock index rose 0.15 per cent, while Japan’s Nikkei index finished up 0.85 per cent.

Europe

European shares rose for a third straight session on Thursday, as a jump in technology stocks, hopes of a large stimulus under incoming US President Joe Biden and upbeat Chinese export data boosted sentiment.

The pan-European STOXX 600 index rose 0.7 per cent, hitting new highs since February 2020, with mining, auto and travel stocks among the top performers.

Biden is expected to unveil a stimulus package proposal later in the day, designed to jumpstart a pandemic-struck US economy with an economic lifeline that could exceed $1.5 trillion ($1.9 trillion).

Chinese exports grew more than expected in December, data showed, while Germany’s economy shrank by a smaller-than-expected 5.0 per cent in 2020 as a strong state response helped limit the havoc caused by the covid-19 pandemic.

Still, investors were worried the latest coronavirus lockdowns in Europe could further slow a recovery even as vaccination programmes began.

“We came into the year with a view that vaccines will kick in over the first half of the year and economic growth should bounce back materially. Obviously that is more biased to the second half of the year,” said Nick Peters, multi-asset portfolio manager at Fidelity International.

“An uncertain start to the year was within our expectations, and as long as we can see mobility data, PMIs beginning to improve over the year, we’re going to be comfortable with the risk position that we’ve taken.”

European chipmakers received a boost after Taiwan’s TSMC posted a record high quarterly profit due to demand for devices requiring high-end chips.

Semiconductor equipment makers ASMI jumped 7.6 per cent and ASML rose 5.9 per cent, while the wider tech index was up 1.9 per cent.

Finnish telecom network equipment maker Nokia jumped 5.0 per cent after announcing multiple 5G deals with companies including Alphabet’s Google and T-Mobile.

Political worries hit Italy’s FTSE MIB, down 0.5 per cent, after former premier Matteo Renzi withdrew his small Italia Viva party from the ruling coalition, sinking Prime Minister Giuseppe Conte’s government on disagreements over funding.

Shares in Italian lenders, whose big sovereign bond portfolios makes them sensitive to political risk, fell 0.9 per cent.

“While not our base case, early elections look possible and would likely lead to a new government less aligned with the EU,” analysts at Morgan Stanley said in a note.

Carrefour slipped 2.5per cent after the French government took a tough line against any takeover of the retailer by a foreign company in the wake of a $20 billion bid approach by Canadian convenience-store operator Alimentation Couche-Tard.

Swiss plumbing supplies maker Geberit dropped 5.6 per cent after it revealed a hit to sales from the surge in value of the franc during 2020.

North America

Wall Street closed lower on Thursday as hopes for fresh fiscal stimulus ahead of President-elect Joe Biden’s pandemic aid proposal were pitted against a weakening labor market.

The Labor Department’s weekly jobless report showed the number of Americans filing first-time claims for unemployment benefits increased more than expected last week, underscoring the impact of a resurgence in covid-19 infections.

While the S&P 500 lost steam toward the end of the day, it spent most of the session in positive territory as investors counted on Biden unveiling on Thursday evening a stimulus plan that could exceed $1.5 trillion.

“There’s a tug-of-war going on between the prospects for further fiscal stimulus, as a result of Democratic control of the Senate, and a jobs market that has a long way to go before it heals,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “You have these competing forces going on which are keeping markets range bound.”

But Roland noted that disappointing jobs data could provide “further fodder for Biden to potentially market this plan.”

“Everybody’s waiting to hear the details ... Whether it’s $1 trillion or $2 trillion, that’s a massive amount of fiscal stimulus,” she said.

Citing two people familiar with the plans, The New York Times reported that Biden is expected on Thursday to unveil a $1.9 trillion spending package.

Since the S&P had gained steadily ahead of the story Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut suggested investors were selling on the news.

Investors also seemed reassured after US Federal Reserve Chair Jerome Powell said an interest rate hike would not be coming anytime soon and pushed back against suggestions that it might taper bond purchases any time soon.

The Dow Jones Industrial Average fell 68.95 points, or 0.22 per cent, to 30,991.52, the S&P 500 lost 14.3 points, or 0.38 per cent, to 3,795.54 and the Nasdaq Composite dropped 16.31 points, or 0.12 per cent, to 13,112.64.

Of the 11 major S&P sectors, economically-sensitive energy showed the biggest percentage gains as oil prices rose.

The domestically-focused small-cap Russell 2000 index, as well as the Dow Jones Transports index, considered a barometer of economic health, both scaled all-time highs.

Helping the transport index was a rise in shares of Delta Air Lines after Chief Executive Ed Bastian forecast 2021 to be “the year of recovery” after the coronavirus pandemic prompted its first annual loss in 11 years.

The S&P 1500 airlines index also soared.

This was after President Donald Trump became the first president in US history to be impeached twice when the House voted 232–197 on Wednesday to charge him with inciting riots at the Capitol.

While some investors worry the impeachment proceedings could delay stimulus, Max Gokhman, head of asset allocation at Pacific Life Fund Advisors in Newport Beach, California played down these fears saying its not going to “derail the further economic boost that we’re going to get from the stimulus,” he said.

The Philadelphia semiconductor index also hit a record high with a big boost from Taiwan Semiconductor Manufacturing Co Ltd. The chip manufacturer’s US shares jumped after it announced its best-ever quarterly profit and raised revenue and capital spending estimates.

Investors were also waiting for the earnings season to kick into full swing with results from JPMorgan, Citigroup and Wells Fargo slated for Friday.

First-quarter and 2021 corporate guidance will be key for investors as new lockdowns threaten to push back a recovery in corporate earnings, according to investment banks.

With Reuters

is content editor for Morningstar Australia

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